No matter how hard I try, I can’t seem to cancel my SiriusXM satellite radio account.
You see, I’m a proud public-radio nerd. I listen to the live WLRN broadcast until it loops into repetition and then I shift over to podcasts hosted by Terry Gross on Fresh Air or Peter Sagal on “Wait Wait Don’t Tell Me” or Guy Raz on the “TED Radio Hour.”
In between, I tune into the Classic Rock stations on SiriusXM. But lately, I’ve been finding it too repetitive. I really like The Beatles, The Rolling Stones and Led Zeppelin, but not endlessly. And I love the song “Rocket Man” by Elton John. But it loses something if I hear it every single day.
SiriusXM just reported second-quarter 2019 profits of $263 million. You’d think they could buy some more records. Especially in world where their top competitor, Spotify, offers virtually every song ever recorded for less than half the price.
So I called to cancel. Which, as it turns out, is easier said than done.
Upon hearing my request, the first customer service agent transferred me to another department. The second agent was a very persuasive young man who walked me through a well-rehearsed script. “Why did I want to cancel?” he wanted to know. Perhaps, he postulated, I didn’t understand all the benefits and the wide variety of stations that I might not be aware of.
But I was unpersuaded, so he transferred me again. This time to the company’s last line of defense. What if, this super-agent asked, we refunded the unused portion of your current subscription and offered you three months for free, with no obligation to continue?
“Three months free, really?” I thought to myself. OK, that’s an offer I can’t refuse. So I relented, took the deal, and for now I’m still a SiriusXM subscriber.
SiriusXM’s strategy of putting me through a gauntlet before allowing me — or anyone — to cancel was kind of annoying. But it’s part of a smart strategy that makes sense for virtually every business and nonprofit organization.
The strategy is called customer retention, or member retention, and it is based on a simple fact: It’s much easier and far cheaper to keep a customer than it is to find a new customer.
Estimates vary widely, but in my recent experience it takes 12 times more marketing dollars to sell to a brand-new customer than to entice an existing customer to buy again. Which is a staggering difference.
But it makes sense. After all, existing customers have already bought from you. You’ve established trust, inspired confidence and you know for certain that they’re in the market for your products and services.
Or, think about it like this:
The typical business loses roughly 20 to 30 percent of its customers annually. So just to keep revenues flat from year-to-year, the company has to go into the market to find a lot of new customers.
Imagine two business, one retains 90 percent of its customers, and other keeps 80 percent. If both add new customers at the rate of 20 percent per year, the first will have a 10 percent growth in customers per year, the other will have no growth. Seven years later, the first firm will have doubled its revenues and probably tripled its profits. The second will have struggled to merely tread water.
It’s no surprise, then, that investing in customer retention is the single biggest driver of revenue growth. The global consulting and accounting firm KPMG found that customer retention is even bigger and more important that sales strategies, product innovations, price promotions, technological advancements and entering new markets.
No wonder SiriusXM put up such a fight to keep me. Good for them. And good for you if you also hold so tightly to your customers.
Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in helping companies attract more, high-paying customers. He can be reached at firstname.lastname@example.org.